Customs duty not applicable on fresh cut flowers grown in Domestic Tariff Area by Export Oriented Unit.

The Tribunal held that no customs duty is chargeable on fresh cut flowers grown and cleared in the Domestic Tariff Area (DTA) by a 100% Export Oriented Unit (EOU). The Tribunal found that customs duty is only payable on imported goods used in the production of non-excisable goods, not on the final non-excisable product itself. As no evidence showed imported inputs were used in producing the cut flowers, the duty demand was deemed unsustainable. The Commissioner (Appeals) order was upheld, and the Revenue's appeals were dismissed.

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Issues Involved:
1. Whether customs duty is chargeable on fresh cut flowers grown and cleared by the appellant in Domestic Tariff Area (DTA) in terms of Notification No. 126/94-Cus., dated 3-6-1994.

Detailed Analysis:

Background:
The respondent, a 100% Export Oriented Unit (EOU), engaged in growing fresh flowers and clearing them in the Domestic Tariff Area (DTA), was alleged to have not paid the appropriate duty on these products. The Adjudicating Authority confirmed duty demands and imposed penalties. The Commissioner (Appeals) set aside these orders, leading to the Revenue's appeal.

Revenue's Argument:
The Revenue argued that the Adjudicating Authority rightly confirmed the demand in terms of Notification No. 126/94-Cus., which mandates that customs duty is payable on articles manufactured by a 100% EOU if they are not exported. The Revenue cited judgments in *CCE, Pune v. Horizon Flora India Ltd.* and *L.R. Brothers Indo Flora Ltd. v. CC, Meerut* to support their claim that customs duty should be charged on the cut flowers sold in DTA.

Respondent's Argument:
The respondent contended that the final product, fresh cut flowers, is non-excisable and does not find any entry in the Central Excise Tariff. They argued that Notification No. 126/94-Cus. does not empower the department to demand duty on non-excisable final products but only on the imported inputs used for their production. They further asserted that no imported inputs were used in the production of the cut flowers, making the demand for duty unsustainable. The respondent cited judgments in *Commissioner of C. Ex., Pune v. Abbound Bio-Agri Technologies Ltd.*, *Commissioner of Central Excise, Pune-I v. Soex Flora P. Ltd.*, and *Commissioner of Central Excise, Pune-I v. Neha International Ltd.* to support their position.

Tribunal's Analysis:
The Tribunal examined the relevant provisions of Notification No. 126/94-Cus., which distinguishes between excisable and non-excisable goods. For non-excisable goods, customs duty is only payable on the imported goods used for their production, not on the final product itself. The Tribunal noted that in this case, the final product (cut flowers) is non-excisable, and there was no evidence that imported inputs were used in their production. Therefore, no customs duty was payable on the cut flowers cleared in DTA.

Supporting Judgments:
1. Abbound Bio-Agri Technologies Ltd.: The Tribunal held that duty demand is on the imported inputs, not on the non-excisable articles produced.
2. Soex Flora P. Ltd.: The Tribunal reiterated that when goods are non-excisable, demand under the Central Excise Act is not sustainable.
3. Neha International Ltd.: The Tribunal confirmed that only excise duty under Section 3 of the Central Excise Act is payable on DTA clearances by 100% EOUs, and no customs duty is chargeable on non-excisable goods.

Distinguishing Revenue's Cited Judgments:
The Tribunal distinguished the judgments cited by the Revenue, noting that they dealt with customs duty on imported inputs used in non-excisable goods, whereas the present case involved a demand for duty on the non-excisable final product itself.

Conclusion:
The Tribunal concluded that no duty is chargeable on the cut flowers grown and cleared in DTA by the respondent. The impugned order of the Commissioner (Appeals) was sustained, and the Revenue's appeals were dismissed.

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